Padilla v. Am. Modern Home Ins. Co.

• Decision Date: 30 September 2017
• Docket Number: No. CIV 16–0559 JB/KBM,CIV 16–0559 JB/KBM
• Citation: 282 F.Supp.3d 1234
• Parties: Christopher PADILLA, Plaintiff, v. AMERICAN MODERN HOME INSURANCE COMPANY, Government Employees Insurance Company, Don Brown Insurance and Properties, Inc., and Donald G. Brown, Defendants.
• Court: U.S. District Court — District of New Mexico

282 F.Supp.3d 1234

Christopher PADILLA, Plaintiff,

v.AMERICAN MODERN HOME INSURANCE COMPANY, Government Employees Insurance Company, Don Brown Insurance and Properties, Inc., and Donald G. Brown, Defendants.

No. CIV 16–0559 JB/KBM

United States District Court, D. New Mexico.

Signed September 30, 2017

Thomas A Biscup, Zebrowski Law, Shelby Township, Michigan—and—Geoffrey R. Romero, Law Offices of Geoffrey R. Romero, Albuquerque New Mexico, Attorneys for the Plaintiff

Meloney Cargil Perry, Stacy Hemby Thompson, Perry Law P.C., Dallas, Texas, Attorneys for Defendant Government Employees Insurance Company

Megan Day Hill, Civerolo, Gralow & Hill, P.A., Albuquerque, New Mexico, Attorneys for Defendant American Modern Home Insurance Company

John A. Frase, Resnick & Louis, PC, Albuquerque, New Mexico, Attorneys for Defendants Don Brown Insurance and Properties Inc. and Donald G. Brown

MEMORANDUM OPINION AND ORDER

THIS MATTER comes before the Court on the Plaintiff's Motion for Remand, filed July 13, 2016 (Doc. 9)("Motion"). The Court held a hearing on January 20, 2017. The primary issues are: (i) whether 28 U.S.C. § 1446 requires defendants to join in or consent to removal of an action within thirty days after they receive a copy of the initial pleading; and (ii) whether the Plaintiff Christopher Padilla fraudulently joined two of the Defendants in order to defeat federal diversity jurisdiction. The Court concludes that, while all defendants must join in or consent to removal, they need not do so within thirty days after they receive a copy of the initial pleading. The Court also concludes that the Plaintiff did not fraudulently join the non-diverse Defendants, so the Court will grant the Motion and remand the case.

FACTUAL BACKGROUND

To provide context, the Court takes its recitation of the facts from Padilla's Complaint for Breach of Contract and Insurance Bad Faith, filed April, 26, 2016, in Padilla v. American Modern Home Ins. Co., D–202–CV–2016–02675 (Second Judicial District Court, County of Bernalillo, State of New Mexico), in file at July 10, 2016 (Dec. 1–1)("Complaint"). The Court relies on this factual account for background purposes only, and it recognizes that the Complaint's factual account is largely Padilla's version of events. The Court also takes undisputed facts from the Notice of Removal, filed June 10, 2016 (Doc. 1)("Notice of Removal").

Padilla is a resident of Bernalillo County, New Mexico. Complaint ¶ 2, at 2. Defendant American Modern Home Insurance Company ("American Home") is incorporated in Ohio, and it has its principle place of business in Ohio. Notice of Removal, ¶ 8, at 2. Defendant Government Employees Insurance Company ("GEICO") is incorporated in Maryland, and it has its principal place of business in Maryland. Notice of Removal, ¶ 11, at 2. Defendant Don Brown Insurance and Properties, Inc. ("Brown Insurance") is a New Mexico corporation, and it has its principal place of business in Bernalillo County. Complaint ¶ 5, at 2. Defendant Donald G. Brown is a resident of Bernalillo County. See Complaint ¶ 6, at 2.

Padilla owned a 1971 Chevrolet pickup truck that two distinct insurance policies covered. See Complaint ¶¶ 10–13, at 3. American Home issued Padilla a policy covering three collector vehicles, including the 1971 Chevrolet pickup truck. See Complaint ¶ 11, at 3. An insurance policy that GEICO sold to Padilla also covered Padilla's truck, and that policy included uninsured motorist ("UM") coverage. Complaint ¶ 13, at 3. GEICO sold the policy to Padilla through Brown Insurance, which Brown operated and managed. See Complaint ¶ 14, at 3. GEICO and Brown Insurance told Padilla that his insurance policy's UM coverage would "protect[ ] him from damages sustained by an uninsured or underinsured motorist." Complaint ¶ 15, at 3–4.

In February, 2013, as part of the maintenance and repair process for a ruptured fuel line, Padilla parked his truck in his driveway "for safety reasons." Complaint ¶ 17, at 4. Someone stole Padilla's truck on February 8, 2013. See Complaint ¶ 18, at 4. A few days later, Padilla's truck was found burning, and it was a total loss. See Complaint ¶ 19, at 4. The thief remains unidentified.

See Complaint ¶ 19, at 4. Padilla filed an insurance claim with American Home. See Complaint ¶ 20, at 4. On February 12, 2013, American Home denied the claim, because a provision of Padilla's American Home policy restricts its coverage to damage that occurs while the vehicle is stored in a locked garage facility. See Complaint ¶ 21, at 4–5. That coverage restriction applies, however, only when a vehicle is not being used for " ‘Occasional Pleasure Use,’ " meaning " ‘activities consistent with and related to participation in vehicle exhibitions, vehicle club activities, parades, leisure/pleasure drives, or maintenance.’ " Complaint ¶ 22, at 5 (quoting Padilla's American Home policy).

Padilla also filed a claim for UM coverage both with American Home and with GEICO, because, "once the [truck] was taken unlawfully, it was operated without permission by an unknown individual, and thus the driver was an uninsured motorist who caused damage to Mr. Padilla's property (i.e., the pickup)." Complaint ¶ 24, at 5–6. American Home denied Padilla's UM claim in February, 2014, and it asserted that Padilla had rejected UM coverage when purchasing his American Home policy. See Complaint ¶ 26, at 5. Padilla disputes that assertion and says that he "never signed a rejection of [UM] limits." Complaint ¶ 27, at 6.

GEICO also denied Padilla's UM claim, although it acknowledged that Padilla's policy contained UM coverage, because, under GEICO's understanding of New Mexico law, UM coverage does not apply to Padilla's loss. See Complaint ¶ 28, at 6–7. Padilla disagrees with GEICO's understanding of New Mexico law. See Complaint ¶ 34, at 7–8.

PROCEDURAL BACKGROUND

On April 26, 2016, Padilla filed his Complaint in "[t]he Second Judicial District Court, County of Bernalillo, State of New Mexico." Notice of Removal ¶ 2, at 1. On May 2, 2016, Padilla served notice on Brown Insurance and Brown. See Motion at 1–2. On May 11, 2016, both American Home and GEICO received service. See Motion at 2–3. On June 10, 2016, GEICO removed the case to federal court. See Notice of Removal at 8. The Notice of Removal alleges that Brown Insurance and Brown consented to removal. See Notice of Removal ¶ 35, at 6. On June 17, 2016, American Home filed a separate Notice of Consent to Removal, filed June 17, 2016 (Doc. 4)("Notice of Consent to Removal").

1. The Notice of Removal.

GEICO removed the case "on the basis of diversity jurisdiction." Notice of Removal ¶ 36, at 7. According to GEICO, "diversity of citizenship is present in this matter as [Brown Insurance's and Brown's] citizenship does not defeat diversity," Notice of Removal ¶ 29, at 5, because Padilla "does not have a viable claim against" Brown Insurance or Brown, so they "are improperly joined," Notice of Removal ¶ 27, at 5. As justification for its claim that Padilla has no viable claim against Brown Insurance or Brown, GEICO asserts that Padilla "had no contact with [Brown Insurance or Brown] prior to the date of loss of February 8, 2013." Notice of Removal ¶ 27, at 5.

2. The Motion to Remand.

On July 13, 2016, Padilla moved to remand the case to state court on two grounds. First, Padilla argued that the case should be remanded, because "GEICO's removal notice is procedurally defective." Motion at 2. The Notice of Removal is procedurally defective, according to Padilla, because it does not allege that American Home consented to removal, and because American Home's subsequent Notice of Consent—filed more than thirty days after American Home received a copy of the Complaint—was untimely. See Notice of Removal at 7–8. Second, Padilla argued that the case should be remanded on jurisdictional grounds, because Brown Insurance and Brown were not fraudulently joined, so "complete diversity does not exist here." Motion at 11. The joinder of Brown Insurance and Brown was not fraudulent, according to Padilla, because GEICO's assertion that Padilla "purchased the policy through the internet and had no contact with Donald G. Brown or Don Brown Insurance and Properties, Inc. prior to the February 8, 2013 date of loss," Notice of Removal ¶ 21, at 4, is factually incorrect, see Motion at 9–10. Padilla says that he obtained an insurance quote from GEICO's website, but he says that he later purchased the policy—and paid his premium via credit card—at Brown Insurance's office. See Motion at 10. Padilla swore to this version of events in an affidavit and attached it to his Motion, see Affidavit of Christopher R. Padilla ¶¶ 3–5, at 1–2 (dated July 12, 2016), filed July 13, 2016 (Doc. 9–1), and his Complaint accuses Brown Insurance and Brown of misrepresenting the policy that they sold to him in violation of the New Mexico Unfair Practices Act, N.M. Stat. Ann. § 57–12–2 ("UPA"), see Complaint ¶¶ 69, 75, at 21, 23 ("When Defendants ... sold their policies to Mr. Padilla, they represented to and assured Mr. Padilla that he would be provided the coverages described herein ....").

Additionally, Padilla "requests an award of attorneys' fees and costs incurred in responding to the Notice of Removal and obtaining a remand to State court, pursuant to 28 U.S.C. § 1447(c)." Motion at 11. Such an award is justified, Padilla contends, because "GEICO lacked an objectively reasonable basis for seeking removal." Motion at 11.

3. The Responses.

In response to the Motion, GEICO argues that the Notice of Removal is not procedurally defective, because American Home's Notice of Consent to Removal should be considered timely even though it was filed more than thirty days after American Home received a copy of the Complaint, because, "as it had not made an appearance or answered, American [Home] could not file its own joinder or consent prior to the 30–day deadline." Defendant Government Employees Insurance Company's Response...